Revenue Minister David Parker. Photo / Mark Mitchell, File
Revenue Minister David Parker. Photo / Mark Mitchell, File
EDITORIAL
Yesterday, the IRD complied with a request from the Revenue Minister to open the books on over 300 of the wealthiest New Zealanders to look at whether they pay their fair share of tax.
Minister David Parker is unequivocally in the “no” camp and says he would like adebate about whether that is fair.
New Zealand’s tax system is supposed to be progressive, which means the more people earn, the more they are taxed as a proportion of their income. But not all income is taxed equally - and some income, such as most capital gains, is not taxed at all.
One year ago yesterday, Parker delivered an address at Victoria University where he said he wanted to “shine a light” where there was none, on the tax contributions of the most well-off.
The minister was right when he pointed out that the Covid-19 pandemic and the assistance meted out through wage subsidies for businesses affected by the virus and lockdowns, had illustrated the importance of state support for individuals and enterprises facing adversity.
This has improved and broadened the understanding that an important objective of taxes is to redistribute income, as well as the cost of public services, on a socially acceptable basis.
Parker described fair taxes as “as little as possible but as much as is necessary”.
Most of us appreciate taxation is necessary if we are to co-exist in a reasonably healthy, well-educated society where opportunity is afforded to as many as possible. More may have appreciated the concept of a common social good when they needed extra support during the pandemic.
Envy, however, is a powerful elixir and unlikely to go back into the bottle, once uncapped. Suspicions that some exploited the support have pervaded. Seemingly profligate profit margins in some sectors have only amplified the aroma.
Until yesterday, the best measure New Zealand had to estimate the worth of the Household Economic Survey, in which the highest net wealth ever surveyed was $20 million, a figure no one believes for a minute.
Yesterday the IRD returned a verdict that the wealthiest New Zealanders pay tax at half the rate of ordinary people - the tax rate paid by a sample of 311 New Zealanders found they paid a median effective tax rate of 9.4 per cent.
Is that fair? It probably is, if measured by the Minister’s yardstick of “as little as possible but as much as is necessary”.
Funnily enough, fairness means different things depending on whether it’s applied to ourselves, or to someone else.
Most agree that a Capital Gains Tax (CGT) is the most effective tool to address the tax imbalance.
Last year, Parker told the Victoria University audience there was “no secret plan to introduce a CGT nor a wealth tax or a deemed income tax, nor others”. Yesterday, he repeated there was no immediate plan to do so but a tax policy will be announced before the election.
